Hard Money ONLY used WHY? Please Explain

[Michael P.]

I am currently running the numbers to try truly grasp, why hard money over conventional loan.
Besides credit and things like that, why Hard Money?

Most HM will lend up to 75% of Purchase price, or is it 75% of ARV? Because if its purchase price, that makes no sense.

Please someone make sense of this for me.

Example:
Purchase price 75k
ARV 105k

Origination at 1% min, 750.
Interest example 9%, 562.50 / Annual 6750
Plus I have to come up with a down payment?

How and why is this a good deal.

[Zachery Buffin]

Originally posted by @Michael P.:

@ zachery 

@Zachery Buffin
Hi Zach, I totally missed that, yes of course for As Is properties, no lights, no water, you cannot get conventional financing, but why else would someone want to get into this loan?  You still have to come up with a down payment.  The ONLY reason is conventional will not allow to go into something without inspection of electric and water.

 Not just for that reason, though that is primarily what I see around here but if you factor your hard money costs into a deal you can just account for the new numbers. Traditional mortgages have a lot of stipulations and rules not to mention you can only have a certain amount of them out at a time as an individual. 

As I said above these loans don't report to Fannie or Freddie and so aren't part of a persons debt-to-income figures. You can also refi out of hard money later in a traditional mortgage after repairs have been done. Honestly the reasons someone might do it depend largely on their circumstances at the time and the deal on the table. I could give you a ton of examples about when these loans work for a flipper or for a BRRRR strategy but in the end the deal, the math, will determine if it is viable or not.